2nd Quarter Fiscal Year 2017
Earnings Release
Parker Hannifin Corporation
February 2, 2016
Exhibit 99.2
Forward-Looking Statements and
Non-GAAP Financial Measures
Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to
unforeseen uncertainties and risks. These statements may be identified from use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “potential,” “continues,”
“plans,” “forecasts,” “estimates,” “projects,” “predicts,” “would,” “intends,” “anticipates,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and include all
statements regarding future performance, earnings projections, events or developments. It is possible that the future performance and earnings projections of the company, including its individual
segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve
anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and
growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.
The risks and uncertainties in connection with forward-looking statements related to the proposed transaction between CLARCOR and the company include, but are not limited to, the occurrence of
any event, change or other circumstances that could delay the closing of the proposed transaction; the possibility of non-consummation of the proposed transaction and termination of the merger
agreement; the failure to obtain CLARCOR stockholder approval of the proposed transaction or to satisfy any of the other conditions to the merger agreement; the possibility that a governmental
entity may prohibit, delay or refuse to grant a necessary regulatory approval in connection with the proposed transaction; the risk that stockholder litigation in connection with the proposed transaction
may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification and liability; adverse effects on CLARCOR’s common stock or the company’s
common stock because of the failure to complete the proposed transaction; CLARCOR’s or the company’s respective businesses experiencing disruptions due to transaction-related uncertainty or
other factors making it more difficult to maintain relationships with employees, business partners or governmental entities; the parties being unable to successfully implement integration strategies;
and significant transaction costs related to the proposed transaction.
Among other factors which may affect future performance and earnings projections are: economic conditions within the company’s and CLARCOR’s key markets, and the company’s and
CLARCOR’s ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the
effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile
effect on segment performance. Among other factors which may affect future performance of the Company and/or CLARCOR are, as applicable: changes in business relationships with and
purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; CLARCOR’s potential inability to realize the anticipated benefits of the strategic supply
partnership with GE; disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in
product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions; the ability to
successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs
thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully capital allocation initiatives, including
timing, price and execution of share repurchases; availability, limitations or cost increases of raw materials, component products and/or commodities that cannot be recovered in product pricing;
ability to manage costs related to insurance and employee retirement and health care benefits; compliance costs associated with environmental laws and regulations; potential labor disruptions;
threats associated with and efforts to combat terrorism and cyber-security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any
appeals; competitive market conditions and resulting effects on sales and pricing; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties
entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and
undertakes no obligation to update them unless otherwise required by law.
This presentation reconciles (a) sales amounts reported in accordance with U.S. GAAP to sales amounts adjusted to remove the effects of acquisitions and the effects of currency exchange rates, (b)
cash flow from operating activities and cash flow from operating activities as a percent of sales in accordance with U.S. GAAP to cash flow from operating activities and cash flow from operating
activities as a percent of sales without the effect of discretionary pension plan contributions, (c) segment operating income and operating margins reported in accordance with U.S. GAAP to segment
operating income and operating margins without the effect of business realignment charges (d) below the Line Items reported in accordance with U.S. GAAP to Below the Line Items without the
effect of CLARCOR acquisition expenses and, (e) actual and forecast earnings per diluted share reported in accordance with U.S. GAAP to actual and forecast earnings per diluted share without the
effect of business realignment charges and CLARCOR acquisition expenses. The effects of acquisitions, currency exchange rates, discretionary pension plan contributions, business realignment
charges, CLARCOR acquisition expenses are removed to allow investors and the company to meaningfully evaluate changes in sales, and cash flow from operating activities as a percent of sales,
segment operating income, operating margins, below the line items and earnings per diluted share on a comparable basis from period to period. Full year adjusted guidance removes business
realignment charges.
Please visit www.PHstock.com for more information 2
Agenda
3
• Chairman & CEO Comments
• Results & Outlook
• Questions & Answers
Chairman and CEO Comments
4
2nd Quarter FY2017
Recordable Accident Reduction of 31% in the Second Quarter
Second Quarter Sales of $2.67B, Orders Increase 5%
Earnings per Share of $1.78 ($1.91 Adjusted)
Record Segment Operating Margins of 14.4%
Capital Allocation
CLARCOR Transaction Update
Acquired Helac Corporation - Strategic Product Line Addition to Hydraulics
Increased Quarterly Dividend by 5%
Full Year FY2017 Guidance Increased
Sales Essentially Flat for the Year, Increased Earnings
FY17 EPS Guidance Midpoint of $6.96 As Reported ($7.30 Adjusted)
Realignment $0.25 per share, Transaction Costs $0.09 per share
Diluted Earnings Per Share
2nd Quarter FY2017
5
*Adjusted for Business Realignment Charges, CLARCOR Acquisition Expenses
**Adjusted for Business Realignment Charges
Influences on Adjusted Earnings Per Share
2nd Quarter FY2017 vs. 2nd Quarter FY2016
6
*Adjusted for Business Realignment Charges, CLARCOR Acquisition Expenses
**Adjusted for Business Realignment Charges
Sales & Segment Operating Margin
Total Parker
7
$ in millions 2nd Quarter
FY2017
%
Change FY2016
Sales
As Reported 2,671$ (1.3)% 2,706$
Acquisitions 8 0.3 %
Currency (31) (1.1)%
Organic Sales 2,694$ (0.5)%
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 384$ 14.4 % 331$ 12.2 %
Business Realignment 8 35
Adjusted 392$ 14.7 % 366$ 13.5 %
Sales & Segment Operating Margin
Diversified Industrial North America
8
$ in millions 2nd Quarter
FY2017
%
Change FY2016
Sales
As Reported 1,121$ (3.4)% 1,161$
Acquisitions - - %
Currency (7) (0.6)%
Organic Sales 1,128$ (2.8)%
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 184$ 16.4 % 154$ 13.2 %
Business Realignment 2 20
Adjusted 186$ 16.6 % 174$ 15.0 %
Sales & Segment Operating Margin
Diversified Industrial International
9
$ in millions 2nd Quarter
FY2017
%
Change FY2016
Sales
As Reported 1,006$ 1.4 % 993$
Acquisitions 8 0.8 %
Currency (24) (2.4)%
Organic Sales 1,022$ 3.0 %
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 128$ 12.7 % 95$ 9.6 %
Business Realignment 4 14
Adjusted 132$ 13.1 % 109$ 11.0 %
Sales & Segment Operating Margin
Aerospace Systems
10
$ in millions 2nd Quarter
FY2017
%
Change FY2016
Sales
As Reported 544$ (1.6)% 552$
Acquisitions - - %
Currency - - %
Organic Sales 544$ (1.6)%
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 73$ 13.3 % 82$ 14.8 %
Business Realignment 1 0
Adjusted 74$ 13.5 % 82$ 14.8 %
Order Rates
11
Excludes Acquisitions, Divestitures & Currency
3-month year-over-year comparisons of total dollars, except Aerospace Systems
Aerospace Systems is calculated using a 12-month rolling average
Dec 2016 Sep 2016 Dec 2015 Sep 2015
Total Parker 5 %+ 2 %+ 12 %- 11 %-
Diversified Industrial North America 0 %+ 4 %- 15 %- 12 %-
Diversified Industrial International 10 %+ 3 %+ 10 %- 8 %-
Aerospace Systems 9 %+ 14 %+ 11 %- 16 %-
Cash Flow from Operating Activities¹
FY2017 YTD
12
*Adjusted for Discretionary Pension Plan Contribution
FY 2017 % of Sales FY 2016 % of Sales
As Reported Cash Flow From Operating Activities 404$ 7.5% 363$ 6.5%
Discreti nary Pension Plan Contribution 220 200
Adjusted Cash Flow From Operating Activities 6 4$ 11.5% 563$ 10.1%
¹Dollars in millions
FY2017 Guidance
EPS Midpoint: $6.96 As Reported, $7.30 Adjusted
13
Expected FY17 Adjusted Segment Operating Margins exclude FY17 Business Realignment Charges
Expected FY17 Adjusted Below the Line Items and Adjusted Earnings Per Share exclude FY17 Q2 CLARCOR
Acquisition Expenses and Business Realignment Charges
Sales Growth vs. Prior Year
Diversified Industrial North America
Diversified Industrial International
Aerospace Systems
Total Parker
Segment Operating Margins As Reported Adjusted
Diversified Industrial North America 17.2% - 17.6% 17.5% - 17.9%
Diversified Industrial International 12.8% - 13.2% 13.6% - 14.0%
Aerospace Systems 14.9% - 15.1% 15.0% - 15.2%
Total Parker 15.1% - 15.5% 15.5% - 15.9%
Below the Line Items
Corporate General & Administrative Expense, Interest and Other $425 M $409 M
Tax Rate
Full Year
Shares
Diluted Shares Outstanding
Earnings Per Share As Reported Adjusted
Range $6.71 - $7.21 $7.05 - $7.55
135.7M
27.5%
(5.0%) - (1.0%)
(1.0)% - 3.0%
1.0% - 3.0%
(2.3%) - 1.3%
FY2017 Guidance
Reconciliation to Prior Guidance
14
*Adjusted for Business Realignment Charges
**Adjusted for Business Realignment Charges and CLARCOR Acquisition Expenses
15
Appendix
• Consolidated Statement of Income
• Reconciliation of EPS
• Business Segment Information
• Consolidated Balance Sheet
• Consolidated Statement of Cash Flows
• Reconciliation of Cash Flow from Operations to Adjusted Cash
Flow from Operations
• Reconciliation of Forecasted Segment Operating Margins and EPS
• Supplemental Sales Information – Global Technology Platforms
Consolidated Statement of Income
17
(Unaudited) Three Months Ended December 31, Six Months Ended December 31,
(Dollars in thousands except per share amounts) 2016 2015 2016 2015
Net sales 2,670,804$ 2,705,590$ 5,413,935$ 5,574,938$
Cost of sales 2,044,484 2,140,624 4,150,490 4,341,528
Gross profit 626,320 564,966 1,263,445 1,233,410
Selling, general and administrative expenses 336,578 314,666 659,547 684,880
Interest expense 33,444 34,297 67,592 70,057
Other (income), net (64,424) (13,877) (76,661) (27,056)
Income before income taxes 320,722 229,880 612,967 505,529
Income taxes 79,322 46,743 161,329 127,366
Net income 241,400 183,137 451,638 378,163
Less: Noncontrolling interests 95 155 204 203
Net income attributable to common shareholders 241,305$ 182,982$ 451,434$ 377,960$
Earnings per share attributable to common shareholders:
Basic earnings per share 1.81$ 1.35$ 3.38$ 2.78$
Diluted earnings per share 1.78$ 1.33$ 3.33$ 2.74$
Average shares outstanding during period - Basic 133,320,109 135,373,356 133,499,744 136,108,930
Average shares outstanding during period - Diluted 135,812,760 137,065,447 135,596,707 137,788,219
Cash dividends per common share .63$ .63$ 1.26$ 1.26$
Reconciliation of EPS
18
(Unaudited)
(Amounts in Dollars) Three Months Ended December 31, Six Months Ended December 31,
2016 2015 2016 2015
Earnings per diluted share 1.78$ 1.33$ 3.33$ 2.74$
Adjustments:
Business realignment charges 0.04 0.19 0.10 0.30
Acquisition expenses 0.09 - 0.09 -
Adjusted earnings per diluted share 1.91$ 1.52$ 3.52$ 3.04$
Business Segment Information
19
(Unaudited) Three Months Ended December 31, Six Months Ended December 31,
(Dollars in thousands) 2016 2015 2016 2015
Net sales
Diversif ied Industrial:
North America 1,121,053$ 1,160,774$ 2,288,024$ 2,447,104$
International 1,005,968 992,464 2,020,891 2,030,911
Aerospace Systems 543,783 552,352 1,105,020 1,096,923
Total 2,670,804$ 2,705,590$ 5,413,935$ 5,574,938$
Segment operating income
Diversif ied Industrial:
North America 184,013$ 153,581$ 384,624$ 366,329$
International 127,517 95,367 264,713 224,662
Aerospace Systems 72,516 81,764 145,797 155,767
Total segment operating income 384,046 330,712 795,134 746,758
Corporate general and administrative expenses 43,926 31,210 74,960 84,261
Income before interest and other expense 340,120 299,502 720,174 662,497
Interest expense 33,444 34,297 67,592 70,057
Other (income) expense (14,046) 35,325 39,615 86,911
Income before income taxes 320,722$ 229,880$ 612,967$ 505,529$
Reconciliation of Total Segment Operating
Margin to Adjusted Total Segment
Operating Margin
20
(Unaudited)
(Dollars in thousands)
Three Months
Ended
December 31,
2016
Three Months
Ended December
31, 2015
Operating margin Operating margin
Total segment operating income 384,046$ 14.4% 330,712$ 12.2%
Adjustments:
Business realignment charges 7,897 34,800
Adjusted total segment operating income 391,943$ 14.7% 365,512$ 13.5%
Consolidated Balance Sheet
21
(Unaudited) December 31, June 30, December 31,
(Dollars in thousands) 2016 2016 2015
Assets
Current assets:
Cash and cash equivalents 1,520,736$ 1,221,653$ 1,047,494$
Marketable securities and other investments 684,299 882,342 820,682
Trade accounts receivable, net 1,411,074 1,593,920 1,419,934
Non-trade and notes receivable 256,545 232,183 293,913
Inventories 1,241,593 1,173,329 1,279,760
Prepaid expenses 133,592 104,360 141,030
Total current assets 5,247,839 5,207,787 5,002,813
Plant and equipment, net 1,506,201 1,568,100 1,598,185
Deferred income taxes 482,136 605,155 383,805
Goodw ill 2,813,238 2,903,037 2,913,065
Intangible assets, net 849,692 922,571 975,515
Other assets 832,507 827,492 840,920
Total assets 11,731,613$ 12,034,142$ 11,714,303$
Liabilities and equity
Current liabilities:
Notes payable 581,487$ 361,787$ 574,302$
Accounts payable 997,189 1,034,589 948,157
Accrued liabilities 720,844 841,915 736,145
Accrued domestic and foreign taxes 125,954 127,597 105,130
Total current liabilities 2,425,474 2,365,888 2,363,734
Long-term debt 2,653,560 2,652,457 2,701,121
Pensions and other postretirement benefits 1,766,209 2,076,143 1,475,351
Deferred income taxes 50,809 54,395 64,721
Other liabilities 304,583 306,581 306,655
Shareholders' equity 4,527,709 4,575,255 4,799,406
Noncontrolling interests 3,269 3,423 3,315
Total liabilities and equity 11,731,613$ 12,034,142$ 11,714,303$
Consolidated Statement of Cash Flows
22
(Unaudited) Six Months Ended December 31,
(Dollars in thousands) 2016 2015
Cash flows from operating activities:
Net income 451,638$ 378,163$
Depreciation and amortization 149,085 156,093
Stock incentive plan compensation 47,161 39,026
(Gain) on sale of business (44,930) -
Loss (gain) on disposal of assets 310 (336)
(Gain) on sale of marketable securities (230) (158)
Net change in receivables, inventories, and trade payables 44,802 41,866
Net change in other assets and liabilities (313,783) (239,277)
Other, net 70,123 (12,730)
Net cash provided by operating activities 404,176 362,647
Cash flows from investing activities:
Acquisitions (net of cash of $1,760 in 2016 and $3,814 in 2015) (29,927) (67,552)
Capital expenditures (71,356) (75,419)
Proceeds from sale of plant and equipment 4,991 8,506
Proceeds from sale of business 85,610 -
Purchases of marketable securities and other investments (393,909) (575,183)
Maturities and sales of marketable securities and other investments 506,642 527,819
Other, net 241 (41,450)
Net cash provided by (used in) investing activities 102,292 (223,279)
Cash flows from financing activities:
Net payments for common stock activity (194,110) (410,049)
Net proceeds from debt 222,425 356,591
Divi ends (168,990) (171,707)
Net cash (used in) financing activities (140,675) (225,165)
Effect of exchange rate changes on cash (66,710) (47,293)
Net increase (decrease) in cash and cash equivalents 299,083 (133,090)
Cash and cash equivalents at beginning of period 1,221,653 1,180,584
Cash and cash equivalents at end of period 1,520,736$ 1,047,494$
Reconciliation of Cash Flow from
Operations to Adjusted Cash Flow from
Operations
23
(Unaudited)
(Dollars in thousands)
Six Months
Ended
December 31,
2016
Six Months
Ended December
31, 2015
Percent of sales Percent of sales
As reported cash flow from operations 404,176$ 7.5% 362,647$ 6.5%
Discretionary pension contribution 220,000 200,000
Adjusted cash flow from operations 624,176$ 11.5% 562,647$ 10.1%
Reconciliation of Forecasted Segment
Operating Margins and EPS
24
(Unaudited)
(Amounts in dollars)
Fiscal Year
2017
Forecasted earnings per diluted share $6.71 to $7.21
Adjustments:
Business realignment charges .25
Acquisition expenses .09
Adjusted forecasted earnings per diluted share $7.05 to $7.55
(Unaudited)
Fiscal Year 2017
Forecasted As Reported Diversif ied Industrial North America Operating Margin 17.2% - 17.6%
Forecasted Segment Business Realignment Charges as % Net Sales 0.3%
Forecasted Adjusted Diversif ied Industrial North America Operating Margin 17.5% - 17.9%
Forecasted As Reported Diversif ied Industrial International Operating Margin 12.8% - 13.2%
Forecasted Segment Business Realignment Charges as % Net Sales 0.8%
Forecasted Adjusted Diversif ied Industrial International Operating Margin 13.6% - 14.0%
Forecasted As Reported Aerospace Systems Operating Margin 14.9% - 15.1%
Forecasted Segment Business Realignment Charges as % Net Sales 0.1%
Forecasted Adjusted Aerospace Systems Operating Margin 15.0% - 15.2%
Forecasted As Reported Total Parker Operating Margin 15.1% - 15.5%
Forecasted Segment Business Realignment Charges as % Net Sales 0.4%
Forecasted Adjusted Total Parker Operating Margin 15.5% - 15.9%
Supplemental Sales Information
Global Technology Platforms
25
(Unaudited)
(Dollars in thousands)
September 30,
2016
December 31,
2016
March 31,
2017
June 30,
2017
September 30,
2016
December 31,
2016
March 31,
2017
June 30,
2017
Net sales
Diversif ied Industrial:
Motion Systems 741,650$ 754,772$ -$ 741,650$ $ 1,496,422
Flow and Process Control 824,314 783,864 - 824,314 1,608,178
Filtration and Engineered Materials 615,930 588,385 - 615,930 1,204,315
Aerospace Systems 561,237 543,783 - 561,237 1,105,020
Total 2,743,131$ 2,670,804$ -$ -$ 2,743,131$ 5,413,935$ -$ -$
Three Months Ending Fiscal Year-to-Date